Investment case

SIG is a leading distributor of specialist building products in Europe. The Group has a product and service offering of significant scale with strong positions in its three core markets of Insulation and Energy Management, Interiors and Exteriors.

SIG is positioned to continue to achieve market share growth as its branch network develops and matures. As it realises the benefits of cross-border and inter-company synergies, and continues to adopt best practice across its portfolio, the Group will generate sustainable long term growth in shareholder value.

  • Leveraging the Group’s specialist distribution model
  • Positive regulatory developments especially in insulation and energy management
  • Increasing market penetration through targeted investment in branch network, including acquisitions which meet strict financial performance criteria
  • Maturation of new branches
  • Roll out of new format trading platforms
  • Greater exposure to key national account customers
  • Consolidation opportunities in specialist markets
  • Geographical diversification and sector balance – residential and non-residential; new build and RMI; public and private
  • Diversified customer base from major construction companies to small local contractors
  • Specialist expertise which acts as a barrier to entry
  • Strong customer relationships based on high service levels, technical expertise and supply chain management competence
  • Proactive and effective credit management
  • Healthy balance sheet, low leverage, substantial headroom in banking facilities and covenants
  • Effective control of fixed cost base
  • Maintaining record of market outperformance
  • Continuous improvement in operating margins from:
    • enhanced product mix
    • network optimisation
    • management of sales and purchase prices
    • economies of scale
  • 100% operating cash conversion over the medium term
  • Focus on ROCE
  • Maintain a progressive dividend policy with cover of 2-3x over the medium term

Post-tax Return on Capital Employed (“ROCE”) is the key metric for the Group and is calculated as underlying operating profit less tax, divided by average net assets plus average net debt.  

In 2015 SIG’s ROCE decreased by 110bps to 9.3% (2014: 10.4%) mainly due to weaker trading conditions.  Assuming a full year contribution from acquisitions completed in the year, ROCE would have been 40bps higher.

Going forward SIG remains committed to increasing ROCE.   As well as taking a disciplined approach to its capital management, SIG seeks to achieve this through further improvements in its gross and operating margins.